RESEDA, Calif. -- The Securities and Exchange Commission is investigating a wide range of alleged fraudulent practices at ZZZZ Best Co. and believes the company may be forced to file for bankruptcy-law protection shortly, sources familiar with the investigation said.

National over-the-counter trading in shares of the fast-growing carpet-cleaning concern was expected to be halted this morning. ZZZZ Best stock has plummeted on heavy volume since a published report May 22 that the company and a flower shop owned by a top executive submitted phony credit card billings.

The company acknowledged Friday that "significant" questions have arisen concerning its previously disclosed financial information, and that its lawyers are conducting an investigation.

ZZZZ Best also said its flamboyant 21-year-old chief executive officer, Barry Minkow, resigned. Mr. Minkow founded ZZZZ Best at the age of 15 and built it into a public company with a stock market valuation of more than $175 million at its peak. He also served as chairman and president.

A company director, who asked to remain anonymous, confirmed that the board is considering bankruptcy-law protection. Another source said the appointment of an independent trustee is likely. And a former company executive and two large shareholders said major contracts ZZZZ Best claimed to have received now appear to have been fraudulent.

The SEC is said to be investigating allegations of phony receivables, money laundering, organized-crime connections, and various securities-law violations by ZZZZ Best and some current or former executives. Mr. Minkow couldn't be reached, and the company wouldn't elaborate on a terse news release issued Friday.

Mr. Minkow became a media celebrity, gaining press attention coast-to-coast and appearing on talk shows as the quintessential young entrepreneur. The company said Mr. Minkow cited "severe medical problems" in resigning as chief executive and as a director.

Helen Melman, a lawyer for the company, said Mr. Minkow's resignation was submitted Thursday morning but wasn't announced until late Friday because ZZZZ Best directors had wanted to meet first.

The company didn't specifically say Mr. Minkow left his other posts, but said Bruce Andersen, chief financial officer, was named interim president. Mr. Andersen's age was listed as 36 in a company filing last November.

ZZZZ Best also said it probably can't complete its previously announced acquisition of Flagship Cleaning Services Inc. from London-based Northern Foods PLC for about $25 million.

ZZZZ Best shares dropped $1.125 to close at $3.50 Thursday following rumors of Mr. Minkow's resignation. It was the most active issue in national over-the-counter trading that day, with more than two million shares changing hands.

The company's shares have plunged from a 12-month high of $18.375. Mr. Minkow controls slightly more than half of the roughly 11 million shares outstanding.

Mr. Minkow acknowledged in May that ZZZZ Best submitted $72,000 in false credit card charges during 1984 and 1985, but he blamed subcontractors and made restitution.

In early 1986, however, a flower shop in Canoga Park, Calif., owned at the time by ZZZZ Best's chief operating officer Charles B. Arrington III submitted another $91,000 in false charges. Mr. Minkow said in that case that Mr. Arrington inherited the credit card problems when he bought the store. Mr. Arrington couldn't be reached, but city tax records show him as the owner from October 1985 until July 1, 1986.

ZZZZ Best said questions about its financial reports arose during an investigation by a law firm it hired to look into the credit card problems and into "issues concerning the company's restoration business." In filings with the SEC in recent months, ZZZZ Best said it derives as much as 86% of its revenue from work in water-damaged and fire-damaged buildings.

The company said that until the Los Angeles-based firm of Kadison, Pfaelzer, Woodard, Quinn & Rossi completes its inquiry, the company can't "determine what effect there may be upon the company's current restoration contracts or such previously reported information."

For the nine months ended Jan. 31, ZZZZ Best had net income of $3.4 million, or 38 cents a share, on revenue of $33.4 million. While earnings haven't been reported for the year ended April 30, the company in late May projected net income of $5 million, or 50 cents a share, compared with $900,000, or 12 cents a share, the year earlier. It said revenue soared to $50 million from $4.8 million.

The company and Mr. Minkow are the target of at least two class-action civil suits filed by shareholders -- one charging false statements and other securities-law violations in connection with the planned Flagship acquisition, and the other alleging that shareholders were harmed by the failure of ZZZZ Best to disclose the credit card fraud in a Dec. 9 prospectus.

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